COMMITMENTS AND CONTINGENCIES
|9 Months Ended|
Sep. 30, 2020
|Commitments and Contingencies Disclosure [Abstract]|
|COMMITMENTS AND CONTINGENCIES||
NOTE 6 COMMITMENTS AND CONTINGENCIES
Delinquent Payroll Taxes Payable
As of the date hereof, the Company has paid its delinquent payroll taxes and late fees in full. At September 30, 2020 and December 31, 2019, the payroll taxes payable balance of $3,146 and $115,111 includes accrued late fees in the amount of zero and $37,210, respectively.
Operating Lease Obligations
The Company has an operating lease agreement for office space of approximately 8,308 square feet that was amended on May 1, 2016 and again on April 1, 2019, increasing the office space to approximately 10,203 square feet, with the lease ending on October 31, 2021. The rent is subject to an annual escalation of 3%, beginning May 1, 2017.
The Company entered a new lease agreement of office and warehouse combination space of approximately 4,400 square feet on June 1, 2018 and ending May 31, 2021. This additional space allows for resource growth and engineering efforts for operations before deploying to the field. The rent is subject to an annual escalation of 3%.
The Company now has a total of office and warehouse space of approximately 14,603 square feet.
At September 30, 2020, future minimum lease payments due under Operating Leases are as follows:
Executive Severance Agreement
On July 10, 2020, Duos Technologies Group, Inc. (the Company) announced that the Chief Executive Officer and President of the Company (the former CEO) would retire from these positions, effective as of September 1, 2020 (the CEO Transition). In order to facilitate a transition of his duties, the Company and the former CEO entered into a separation agreement which became effective as of July 10, 2020 (the Separation Agreement). Pursuant to the Separation Agreement, the former CEOs employment with the Company ended on September 1, 2020 and will receive separation payments over a 36-month period equal to his base salary plus $75,000 as well as certain limited health and life insurance benefits. The Separation Agreement also contains confidentiality, non-disparagement and non-solicitation covenants and a release of claims by the former CEO who continues to serve as Chairman of the Board of Directors of the Company. The Separation Agreement resulted in a one-time charge of approximately $885,000 which will be amortized in equal amounts over the 36-month term of the agreement.
In accordance with the agreement the Company will pay to the Executive the total sum of approximately $885,000, to be paid by the Company in biweekly installments over the thirty-six (36) month period beginning on the first regular Company pay period after September 1, 2020. Notwithstanding the foregoing, the status of the Executive as a Specified Employee as defined in Internal Revenue Code Section 409A has the effect of delaying any payments to Executive hereunder for six (6) months after the Separation Date. The Company will pay to the Executive on March 1, 2021, a lump sum amount equal to the first six (6) months of payments of approximately $148,000 owed to the Executive then continue to pay Executive in bi-weekly installments for thirty (30) months thereafter, as contemplated in the Employment Agreement. In addition, the Company will pay one-half of the Executives current life insurance premiums for thirty-six (36) months of approximately $1,200 and provide and pay for the Executives health insurance for eighteen (18) months following the Separation of approximately $1,700. Unvested options in the amount of 50,358 became exercisable and vested in their entirety on the Separation Date ($95,127). The Company made payment of his attorneys fees for legal work associated with the negotiation and drafting of this Agreement of approximately $17,000.
The entire Separation Agreement is filed as an exhibit in this report.
The entire disclosure for commitments and contingencies.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef